DENMARK - Lehman Brothers is to launch a stand alone Danish Mortgage Index, which will include investment-grade, fixed-rate mortgages denominated in Danish krone.

The Danish bond market is the second largest in Europe, following the Geman Pfandbriefe market, and the Danish mortgage market has a market value of around e108bn.

Says Ravin Onakan, co-head of European indices at Lehman Brothers: “Danish mortgages as an asset class comprise a very large part of the Danish market, and we have seen a lot of interest from the Danish investor base to include the asset class in our range of indices.”

An index advisory council, made up of major users of Lehman’s indices meet annually to discuss changes to the range, and it was agreed to establish the Danish mortgage index.

Nordea Markets, the Danish Mortgage Association and Danske Bank have helped facilitate the construction of the Danish Mortgage Index.

The Danish Mortgage Index will include investment-grade, fixed-rate mortgages with a minimum maturity of one year issued by Realkredit Danmark, Nykredit, BRFkredit, Nordea Kredit, Danske Kredit, and Totalkredit. In addition, only securities denominated in Danish krone with a par amount outstanding of at least €300 million will be included.

Although initially acting as a stand-alone index, and not contributing to the Global Aggregate Index nor the Pan-European Aggregate Index, says Robert Campbell, co-head of European Fixed Income Research: “once global investors become familiar with this asset class, there is the possibility of rolling it into the broader market indices.” At the moment only around 12-13% of investments in Danish mortgages are international in origin.

The index will launch 1 December.

Fixed income as an asset class is coming under scrutiny as a result of the equity market downturn, and many index providers are realising that they must offer products to facilitate increasing investor demand. The FTSE Group announced in October that it would be launching a new global bond index series.